Securities and Exchange Commission Files Complaint Against Former J.P. Morgan Broker in $20 Million Fraud Case

On April 16, 2015, the Securities and Exchange Commission (“SEC”) filed a complaint (“Complaint”) in the United States District Court for the Southern District of New York against former J.P. Morgan Securities, LLC (J.P. Morgan”) broker Michael J. Oppenheim (“Oppenheim”). The Complaint alleges that Oppenheim, together with his wife, a relief defendant, executed a fraudulent scheme to convert approximately $20 million worth of customer funds, in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule l0b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (the “Advisers Act”), 15 U.S.C. §§ 80b-6(1) and 80b-6(2).

Specifically, the Complaint alleges that from March 2011 through October 2014, Oppenheim, while employed as a “Private Client Advisor” at J.P. Morgan, stole at least $20 million from his customers. According to the SEC, two of Oppenheim’s clients approached him looking for safe and conservative investments and in response to their request, Oppenheim made the recommendation to invest in J.P. Morgan’s New York municipal bond mutual fund. Oppenheim then obtained these customers’ written approval to withdraw funds from the customers’ accounts for purchase of the New York municipal bond mutual fund shares. However, instead of purchasing these shares, Oppenheim converted the customer funds into cashier’s checks and then deposited those checks into his own brokerage accounts. The Complaint further alleges that Oppenheim used those funds to engage in speculative options trading in companies like Tesla, Apple, Google, and Netflix, which resulted in significant losses that occurred almost immediately after the funds were deposited in Oppenheim’s accounts. The Complaint also alleges that when Oppenheim’s brokerage accounts showed positive cash balances, he wired funds to his personal account or accounts held jointly with his wife. Additionally, some of the funds were used to pay off the mortgage on Oppenheim’s wife’s home.

Oppenheim was able to avoid detection by replenishing victims, depleted account balances with money he transferred, without authorization, from other victims’ accounts. Additionally, when customers sought their balance statements, Oppenheim would transmit fabricated account statements that contained the customer’s information and account number, but actually reflected the holdings of another customer. Additionally, when a customer’s accountant asked for a 1099 tax form reflecting his alleged mutual fund holdings, Oppenheim stated that no form 1099 was necessary because the entire portfolio consisted of only tax free bonds. Finally, when a customer was considering purchasing a home, Oppenheim sent the fabricated account statements that contained fictitious values for the municipal bond mutual fund.

In the Complaint, the SEC seeks a final judgment: 1) permanently restraining and enjoining Oppenheim from engaging in the acts, practices and courses of business alleged in the Complaint; 2) requiring Oppenheim and his wife to disgorge ill-gotten gains and to pay prejudgment interest thereon; and 3) imposing civil money penalties allowed under the Exchange Act and the Advisers Act.